[Federal Register Volume 67, Number 202 (Friday, October 18, 2002)]
[Notices]
[Pages 64429-64431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26513]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46638; File No. SR-MSRB-2002-13]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Municipal Fund Securities Limited Principal 
Qualification Examination (Series 51) and Rule G-3 on Professional 
Qualifications

October 10, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on September 30, 2002 the Municipal Securities 
Rulemaking Board (``MSRB'' or ``Board'') filed with the Securities and 
Exchange Commission (``Commission'' or ``SEC'') a proposed rule change 
(File No. SR-MSRB-2002-13). The proposed rule change is described in 
Items I, II, and III below, which Items have been prepared by the MSRB. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB has filed with the SEC a proposed rule change consisting 
of the test specifications and the study outline for the MSRB's new 
Municipal Fund Securities Limited Principal Qualification Examination 
(Test Series 51), as well as an amendment to Rule G-3, on professional 
qualifications (hereafter referred to as ``the proposed rule change''). 
The amendment to Rule G-3 will extend to March 31, 2003 the period 
during which certain categories of principals may continue to act as 
municipal fund securities limited principals without taking and passing 
the new Series 51 examination. The proposed rule change will become 
operative on November 1, 2002.
    A description of the new Series 51 examination is included in the 
study outline. Confidential information on the examination is included 
in the test specifications and has been filed with the Secretary of the 
SEC pursuant to Rule 24b-2 under the Exchange Act for confidential 
treatment. Below is the text of the amendment to Rule G-3. New language 
is italicized; deletions are in brackets.
Rule G-3. Classification of Principals and Representatives; Numerical 
Requirements; Testing; Continuing Education Requirements
    (a) No change.
    (b) Municipal Securities Principal; Municipal Fund Securities 
Limited Principal.
    (i)-(iii) No change.
    (iv) Municipal Fund Securities Limited Principal.
    (A)-(D) No change.
    (E) Temporary Provisions for Municipal Fund Securities Limited 
Principal. Notwithstanding any other provision of this rule, until 
March 31, 2003, [December 31, 2002,] the following provisions shall 
apply to any broker, dealer or municipal securities dealer whose 
municipal securities activities are limited exclusively to municipal 
fund securities:
    (1)-(3) No change.
    (4) On and after April 1, 2003, [January 1, 2003,] all municipal 
fund securities limited principals (including any municipal fund 
securities limited principals designated as provided in clause 
(b)(iv)(E)(1)) must be qualified as provided in subparagraph 
(b)(iv)(B).
    (c)-(h) No change.
* * * * *

[[Page 64430]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
texts of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    (a) Under section (b)(iv) of Rule G-3, on professional 
qualifications, an associated person of a broker, dealer or municipal 
securities dealer (``dealer'') may undertake supervisory activities 
with respect to the dealer's municipal fund securities activities by 
qualifying as a municipal fund securities limited principal. Current 
rule G-3(b)(iv)(E)(4) provides that, on and after January 1, 2003, all 
municipal fund securities limited principals must be qualified by 
taking and passing the new Series 51 examination.\3\
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    \3\ Prior to this date, a general securities principal (Series 
24) or investment company/variable contracts limited principal 
(Series 26) may act as a municipal fund securities limited principal 
without further qualification.
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    The Series 51 examination will qualify an associated person of a 
dealer to manage, direct or supervise certain specified activities, but 
solely as such activities relate to transactions in municipal fund 
securities.\4\ The examination will be a 90-minute, 60 multiple choice 
question examination with 70% as the passing score. It will measure a 
candidate's knowledge of municipal fund securities and the securities 
industry rules and regulations pertinent to such products. The 
examination will require that the individual taking it have previously 
or concurrently taken and passed the general securities principal 
qualification examination (Series 24) or investment company and annuity 
principal qualification examination (Series 26).
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    \4\ These activities consist of (A) underwriting, trading or 
sales of municipal fund securities; (B) financial advisory or 
consultant services for issuers in connection with the issuance of 
municipal fund securities; (C) processing, clearance, and (in the 
case of non-bank dealers) safekeeping of municipal fund securities; 
(D) research or investment advice with respect to municipal fund 
securities (but only to the extent related to the activities 
described in (A) or (B)); (E) any other activities which involve 
communication, directly or indirectly, with public investors in 
municipal fund securities (but only to the extent related to the 
activities described in (A) or (B)); (F) maintenance of records with 
respect to the activities described in (A) through (E); and (G) 
training of municipal securities principals, municipal fund 
securities limited principals or municipal securities 
representatives with respect to municipal fund securities. Municipal 
securities principals (Series 53) will continue to be qualified to 
manage, direct or supervise such activities, as they relate to 
municipal fund securities or to any other type of municipal 
securities. Municipal securities sales principal (Series 9/10) will 
continue to be qualified to supervise sales to and purchases from 
customers of municipal securities, including municipal fund 
securities.
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    A subcommittee of the MSRB's Professional Qualifications Advisory 
Committee consisting of industry representatives, working with MSRB 
staff in consultation with NASD staff, developed the Series 51 study 
outline and test specifications. The examination will be divided into 
seven topical sections. The topical sections and the percent of 
questions designated for each such section are as follows: Regulatory 
Structure (5%); Product Knowledge (20%); General Supervision (20%); 
Fair Practice and Conflicts of Interest (15%); Sales Supervision (20%); 
Underwriting and Disclosure Obligations (10%); and Operations (10%). 
The specifications for the Series 51 examination specify how the 
questions asked on each examination are to be allocated among the 
various subtopics within these topical sections.
    Rule G-3 currently allows general securities principals (Series 24) 
and investment company limited principals (Series 26) to supervise 
municipal fund securities activities during a transition period that 
ends on December 31, 2002. On and after January 1, 2003, all municipal 
fund securities limited principals must be qualified by taking and 
passing the new Series 51 examination. However, administration of this 
examination will not begin until on or about January 1, 2003. Thus, the 
MSRB is extending the period during which Series 24 and 26 principals 
may continue to supervise municipal fund securities activities without 
further qualification. The amendment to Rule G-3 will accomplish this 
by extending the transition period to March 31, 2003. This extension 
will provide a three-month period during which candidates can take and 
pass the examination. Under the amendment, all municipal fund 
securities limited principals will be required to have taken and passed 
the Series 51 examination by April 1, 2003.
    (b) The MSRB believes that the proposed rule change is consistent 
with Section 15B(b)(2)(A) of the Exchange Act, which provides that it 
is the MSRB's responsibility to propose and adopt rules which:

provide that no municipal securities broker or municipal securities 
dealer shall effect any transaction in, or induce or attempt to 
induce the purchase or sale of, any municipal security unless * * * 
such municipal securities broker or municipal securities dealer and 
every natural person associated with such municipal securities 
broker or municipal securities dealer meets such standards of 
training, experience, competence, and such other qualifications as 
the Board finds necessary or appropriate in the public interest or 
for the protection of investors.

    Section 15B(b)(2)(A) of the Exchange Act also provides that the 
MSRB may appropriately classify municipal securities brokers and 
municipal securities dealers and their associated personnel and require 
persons in any such class to pass tests prescribed by the MSRB.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Exchange Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
(iii) was provided to the SEC for its review at least five business 
days prior to the filing date; and (iv) does not become operative until 
November 1, 2002, which is more than thirty (30) days after the date of 
its filing, the MSRB has submitted this proposed rule change to become 
effective pursuant to section 19(b)(3)(A) of the Exchange Act and Rule 
19b-4(f)(6) thereunder. In particular, the MSRB believes the proposed 
rule change qualifies as a ``non-controversial filing'' in that the 
proposed rule change does not significantly affect the protection of 
investors or the public interest and does not impose any significant 
burden on competition. The Commission has determined that acceleration 
of the proposed filings is consistent with the protection of investors 
and the public

[[Page 64431]]

interest.\5\ At any time within 60 days of this filing, the Commission 
may summarily abrogate this proposal if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act.
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    \5\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposal's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Exchange Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609. Copies of the submissions, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of the 
filing will also be available for inspection and copying at the Board's 
offices. All submissions should refer to File No. SR-MSRB-2002-13 and 
should be submitted by November 8, 2002.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26513 Filed 10-17-02; 8:45 am]
BILLING CODE 8010-01-P